Bankruptcy

CIAT is very aware of the current economic climate and impact it is having on some members and their practices. The number of enquiries in relation to the recession has increased over the last few months.

This Information note is intended to detail CIAT’s policy on members becoming bankrupt or insolvent in relation to the Institute’s current constitution.

If you are the subject of a bankruptcy order or become insolvent you are required to advise us in writing within 28 days detailing your circumstances. 

Within CIAT’s Constitution under Bye Law 11d) it states that a person shall cease to be a member if that member becomes bankrupt, insolvent or suspends payment or enter into a composition or arrangement with his creditors generally.

However, the Institute’s Executive Board has the discretion within Bye Law 11 to reverse the cessation of membership subject to investigation by the Institute’s Conduct Committee

Therefore if you are declared bankrupt, or you are a director or LLP member of an insolvent company or practice, this will not automatically lead to disciplinary action or permanent cessation of membership, although you will not be permitted to be director or LLP member until the terms of your bankruptcy have been discharged. We may ask for information on the circumstances surrounding your financial situation, for example, its impact on your clients and creditors and how the financial problems arose. If your practice has been placed into liquidation, we may ask for the Company’s Statement of Affairs. It is only when our investigations suggest there may have been a wilful disregard by a member of their responsibilities, or a lack of integrity in line with the Institute’s Code of Conduct, that the case may fall within the Conduct and Disciplinary Procedures.

The availability of ongoing or run-off professional indemnity insurance cover (where the practice has ceased) may vary according to the particular situation. Members should take advice from their insurance broker or provider, or an insolvency practitioner, on any steps that can be taken to continue PII.

McParland Finn Ltd who run CIAT Insurance Services state that the issue is whether the premium has been paid, rather than whether or not the existing policy-holder has been declared bankrupt.

If the member has paid the premium, the policy will remain in force until it expires thereafter MFL would recommend run-off cover when it comes up for renewal should the member be unable to continue to practice; this is the standard procedure for any member who ceases to provide a service. 

Should MFL be approached to provide cover for a member who has been declared bankrupt, they would provide cover in the usual way. However, the only possible issues might be with obtaining premium finance should the member wish to pay by instalments, and MFL would require payment in advance or the individual would need to make arrangements for their own finance of the premium.  Insurers may ask for reasons of the bankruptcy but this should not affect any cover offered.

For those who are facing financial difficulties, help and advice is available from a number of sources.  Seeking help at an early stage is both constructive and beneficial, and ensures that the range of options available can be fully explored. The Insolvency Service (www.insolvency.gov.uk) provides general guidance, and we would also encourage members to seek professional advice from their accountant, Citizens’ Advice Bureau or bank before deciding on the most appropriate way forward.